Credit Card Delinquencies on the Rise: What You Need to Know

“Americans took out a record 87.5 million in new credit cards and 22.1 million in personal loans in 2022” — TransUnion Consumer Pulse Study

The financial industry is currently facing a challenging environment with a simultaneous decrease in credit card originations, an increase in delinquency rates, and a Fed interest rate hike. As a result, banks and other financial institutions are expected to prioritize recovery efforts and reduce operating expenses. This trend is highlighted in recent reports from JPMorgan Chase and Bank of America, both of which show an increase in delinquency rates and net charge-off rates. In addition, TransUnion’s 2023 forecast predicts a further increase in credit card and unsecured personal loan delinquency rates. The forecast suggests a decline in credit card originations next year as the trend continues. 

 JPMorgan Chase reported that the credit card delinquency rate increased from 0.76% to 0.83% in the first quarter of 2023. Meanwhile, the average 30-plus-days credit card delinquency rate for JPMorgan Chase in 2022 was 0.86%. Bank of America‘s Master Credit Card Trust II reported an increase in delinquency rates and net charge-off rates from December 2022 to January 2023. Specifically, the delinquency rate increased from 1.03% to 1.09%, while the net charge-off rate increased from 1.43% to 1.50%. 

 TransUnion’s 2023 forecast, based on its latest Consumer Pulse Study, predicts an increase in credit card delinquencies from 2.10% to 2.60% in the coming year. Moreover, the delinquency rates on unsecured personal loans are expected to increase from 4.1% to 4.3% over the same period. This forecast indicates that credit card originations will likely decline in 2023 compared to this year’s levels. 

 In summary, the current economic climate is expected to have a significant impact on the financial industry, leading to prioritizing recoveries and cost-cutting measures. Financial institutions must find ways to manage delinquency rates and innovative ways to stimulate credit card originations. Enformion’s powerful machine learning and AI-backed scoring products can help save time and effort during these challenging times and enable financial institutions to be more proactive.